Digital transformation. If you’re like many leaders, you read that term with a mix of confusion, fear or promise. Digital technologies have advanced to include 3D printing, internet of things (IoT) and artificial intelligence. With the current technological landscape, digitalization can no longer be considered an add-on feature to existing channels, products or services. Discovering how to shape and react to digital disruption should be top of mind for leaders of most, if not all, organizations.
John Chambers, outgoing CEO of Cisco Systems, stated it well in 2015: “Nearly 40 percent of all businesses will die in the next 10 years if they don’t figure out how to change their entire company to accommodate new technologies.” A 2017 Harvard Business Review study found that fewer than 20 percent of companies take the path to “digital reinvention.” Since then, we’ve seen “once innovative” companies lose their competitive edge.
Before digging in, let’s get on the same page. Digital transformation is defined as leveraging digital technology to drive strategic improvement across an organization. Digital transformation doesn’t cover just IoT, artificial intelligence or predictive analytics. It can mean selecting, designing and implementing a new customer relationship management software, a new development methodology, replacing several operational tools with a new one, or one tool with several new ones. (Need to improve customer experience? Check out Improving Customer Experience With Digital Transformation, Big Data and Analytics.)
Different companies and industries approach digital transformation in a variety of ways. The entertainment industry, for example, has imposed across-the-board digital transformation over the past 20 years, adding digital tools from filming to editing to marketing and distribution.
We don’t have to look far to find companies that have failed to embrace digital transformation and, as a result, suffered massively because of it. In 1985, Blockbuster was the leading video rental company, with over 9,000 stores worldwide. Over time, Blockbuster failed to anticipate, much less respond to, customer demand for new video viewing technologies. The reasons for the demise of Blockbuster have become more evident by the ingenuity of Netflix. With over $11.7 billion in revenue to date, Netflix informs its video delivery decisions with data and is committed to taking risks to adapt to ever-changing customer and technology habits.
When embarking on a digital transformation project, common mistakes companies make include:
- Failing to clearly define goals
- Attempting to force legacy mindsets and processes into new technologies
- Failing to represent all stakeholders in requirement-gathering, technology selection and design
- Viewing technology selection and implementation as just a technology change, rather than a shift in organizational mindset
So, how can organizations avoid digital transformation pitfalls? Here are a few key factors to consider:
Not Everything Needs to Be Transformed
Recognizing that not every aspect of your business needs a major change is a critical step in the digital transformation process. Migrating technologies for the sake of migrating technologies is not always a good idea, however, what should be taken into account is migrating technologies that provide added business impact as well as some technological benefits. In short, new does not always mean better. This is something I see executives struggle with frequently. With this, it’s important for organizations to determine if the technologies they are considering are stable, the business impacts are proven and then invest heavily as an early majority adopter of those proven technologies.
A Fresh Perspective
Understanding why the digital transformation is important is the first roadblock for any company to overcome. Companies use technology to design, build and implement repeatable processes that allow them to become more efficient, retain customers and better anticipate consumer needs. Seeing the world through a digital lens is key to changing the way businesses operate and generate revenue. An organization that understands and strategically implements digital technology creates new pathways to success. (For more digital transformation tips, check out The Do’s and Don’ts of Digital Transformation.)
Begin by Defining Requirements and Goals
There is no one-size-fits-all approach to a digital transformation, as the term can often mean different things for different organizations. It’s impossible to successfully innovate without a clear plan and specific goals in place. Otherwise, who knows what “success” is? After defining the goal, determine high-level requirements that will support achievement of the goal, then create a road map to implement the appropriate technologies to meet those requirements.
The Right Team
Digital transformation cannot be just an “IT thing.” It affects an entire company and completely changes how business gets done. A company launching a digital transformation must begin with an evaluation of team dynamics. Which groups will be impacted by the technology? How will they react? Is there a reason to apply the technology to multiple business units and/or functional groups, or should they remain independent? There is a lot of contention around dismantling of internal silos, as it may or may not be the right thing for a company, and breaking down silos to work cross functionally doesn’t always drive technology implementation success.
Companies should focus on building a solid project management team and determining the most appropriate stakeholders to take responsibility for each task. Each individual's role in supporting the digital transformation should complement the others and benefit the pursuit of the strategic goal. Companies which utilize their internal IT department leaders for their technical expertise, their branding and marketing departments to promote and sell the digital initiatives internally, and operational teams to implement the project are more likely to conquer the digital transformation.
Change is rarely easy. For many, the rise of the digital tide has created fear for human workers as they believe technology, such as intelligent automation, presents a threat to their careers and livelihood. It’s imperative that companies take time to educate and have a dialogue about the changes with all team members, from baby boomers who are preparing to retire, to millennials and Gen Xers whose careers are just beginning. Introducing user-friendly, easily configured technologies is one of the best ways to start integrating new technologies into the fold.
If you’re not already, it’s time to look at the bigger picture. A digital transformation requires companies to re-examine where they are and build a road map of where the organization needs to be in order to thrive in the long term. Starting small and building wisely works, but it’s also important to not become lost in the process. As Eric Pearson, CIO of International Hotel Group said, “It’s no longer the big beating the small, but the fast beating the slow.”